Examination of Witnesses (Questions 360
- 374)
THURSDAY 8 NOVEMBER 2001
MR NORMAN
ROSE, MR
PHILLIP TURNER,
MR STEVE
MCGUIRE
AND MR
STEPHEN WEEKS
Chairman
360. We may need to go to Australia to look
at it.
(Mr Weeks) We would be happy to accompany you and
introduce you to the Australian Nursing Federation.
John Austin
361. I think it has been suggested that the
most attractive contracts for the private sector are those which
have reducing costs over the years; and just going back on the
question to Mr Rose as to what degree of flexibility you have
got to reduce your overall costs over the years, if you do not
have responsibility for staffing budgets within the contract?
(Mr Rose) When we bid for a PFI contract which is,
say, 30 years long, we get into the area of crystal ball gazing,
because nobody knows what clinical services or, indeed, what hospital
requirements and demographics will be five years from now, far
less 30 years. We are, however, involved in the maintenance of
the building and the general provision of services, which we believe
will be there, and we have to make an educated guess as to what
the future will be. Those services are market tested every five
years, and every five years, therefore, the client and the contractor
will sit down to look at what is being provided, what needs to
be provided and to go out to the market to make sure that that
price is the correct price. And, at that point, if the price is
lower then we have the option to reduce the cost of the contract,
or to walk away from the contract and let somebody else come in
to do it. So there are very clear statements and procedures within
PFI contracts to make sure that those costs are contained, and
preferably reduced; a year-on-year improvement is what both the
public and the private sector wish to go for, and we co-operate
fully with the client in trying to bring this about.
(Mr Weeks) Just to make one technical point on that.
Unfortunately, the provision is not there within that market testing
to reinvolve the public sector; that market testing is solely
a choice about whether another contractor could come in and provide
that service under the current guidance, which is an issue we
have raised with the Department in the past. It may not always
be practical, but we believe, in principle, there is no reason
why, if you are going to have that subsequent market testing,
a public sector provider could not bid to provide that service.
Julia Drown
362. In your memorandum, Mr Rose, you wrote
about bed numbers, which is an issue that has come up in this
inquiry on many occasions, and it is not entirely clear, where
you are saying that the decision is made on the number of beds
in a new or improved hospital. So I wonder if you could clarify
when that decision is made; is it made before you become involved
in any discussions? And could you tell us whether any of your
members have ever had to negotiate a reduction in the number of
beds in order to make a scheme affordable?
(Mr Rose) The decision on beds is made by the Trust,
and solely by the Trust, before the outline business case comes
out; we have no hand in it at all. When bids come in from the
variety of companies, or consortia, who are asked to bid, if at
that stage the Trust then decides that the cost is higher than
the budget the Trust has, then the Trust itself may decide to
look at reducing the number of beds; we have no role in this and
we wish no role in it.
Chairman
363. Could I ask Mr Weeks, in relation to UNISON's
concerns about bed numbers, has your analysis on this, I know
that you have worked with academics who have looked at this, taken
into account the kind of wider connection between the acute sector
and community provision in any particular scheme?
(Mr Weeks) We have, and what we have argued is that
before the National Beds Inquiry, in order to afford their schemes,
the public sector planners, we do not blame the private sector
providers for this, it is the public sector planners—
364. You are in the clear, Mr Rose.
(Mr Rose) Yes, I welcome that.
365. I am sure.
(Mr Weeks) And on this issue, we are happy to say,
we are not arguing that it is the private sector providers who
are driving the agenda, we do say that what happened was the public
sector planners planning these schemes went with various assumptions
about what level of bed occupancy they needed, how much reprovision
could be made in the community, and to what extent they could
improve their throughput levels. They chose assumptions to deliver
the scheme they could afford; in essence, that is our argument,
on a PFI basis. Now they will obviously dispute that, we had considerable
debate to and forth on this, in Durham, but that is the essence
of our argument. Since the National Beds Inquiry has come out,
we recognise that the guidance from the centre is now much better
and much stronger, so the bed numbers issue for the current wave
of PFI schemes is not one that we have been particularly critical
of; there are a few exceptions, where in one or two places we
still believe the Trust is being overambitious in terms of the
number of acute beds. But if you look at what we have been saying
about the current wave, and potentially the future wave, the bed
numbers issue the Government has addressed; there is a cost to
that, however, which some of the first wave Trusts and some of
the ones that are planning are struggling with, to reafford the
new assumptions. So that is the essence of our argument, not that
the private sector was telling the NHS how many beds it should
have, but, in order to get a PFI scheme within the rules that
existed at the time, people were making overoptimistic assumptions
about their ability to meet various clinical targets, and that
was driven by the affordability issue, not by the bed modelling
issue.
Julia Drown
366. So PFI schemes are likely to become more
affordable, are likely to come out better than the public sector
comparator, if they are a smaller scheme?
(Mr Weeks) All other things being equal, you would
expect that to be the case.
367. Why?
(Mr Weeks) Sorry, I did not catch what you said.
368. You are saying that before you get involved
in the private sector bid a Trust has scaled down the number of
beds they require, they must therefore be scaling down the number
of beds they require in their public sector comparator and their
private sector bid. So the only reason a Trust would do that would
be to think that a private sector bid would be more likely to
come out cheaper, better value for money, if it was a smaller
scheme than a larger one?
(Mr Weeks) They believe that the private sector is
going to provide them with the capital they need for a new facility.
In most cases, they are working on the assumption that public
sector capital is not actually available. Our criticism of the
public sector comparator is, it is not really a comparator, and
because of the way it is structured it is a test after the event
of some of the assumptions you have been making, not really a
genuine alternative. What we would want to see is a properly costed,
alternative scheme, which could be financed by public sector capital,
if that public sector capital was allocated. The public sector
comparator is a test on your assumptions about PFI.
Siobhain McDonagh
369. So why is it then that hospitals in my
own area, which are not PFI, which are not being built, have all
reduced their bed numbers, and have all the same problems of bed-blocking
that PFI hospitals have?
(Mr Weeks) I cannot comment on the individual hospitals
in your area. What I would say is, the degree of bed reduction
in the publicly-financed hospitals is significantly lower than
those that went forward as PFI hospitals. We are not saying that
the number of beds that existed in these hospitals should always
be maintained for ever, obviously the NHS is reproviding care
in different settings and it is advancing in technology. So we
are not disputing that some bed reduction was inevitable.
Dr Taylor: Long before PFI was ever thought
of, National Health Service acute beds were going down, they went
down steadily until round about 1996, then they levelled out.
So that was long before PFI came in. And it is the National Beds
Inquiry that has proved that the reduction has gone too low, and
that has been too late for the places that concern me, where the
PFIs were too small; and now, in Worcestershire specifically,
they are at last admitting that and saying they have got to find
an extra 90 beds.
Chairman: If you want any more detail on this,
he has got the Adjournment tonight, so . . . But, Siobhain, I
interrupted you.
Siobhain McDonagh: But the point we are making,
and, Mr Weeks, I would challenge some of the things you said earlier,
because when we went to the hospitals last week, some of your
members were saying, or I understood them to be saying, it was
directly PFI and the private sector that led to the number of
reducing beds, and we had hours of discussion about it. And the
point I am trying to make is that I believe, personally, that
the fact that the beds have reduced is because of all the assumptions
that were made that we now know to be wrong.
Julia Drown
370. Can I just pick that up, because you said
there, by comparing the number of beds in public sector schemes
that have gone ahead with PFI schemes, you are admitting some
public sector schemes which have gone ahead, which suggests the
public sector comparator is not some imaginary thing, it is something
that in some cases has been delivered in the country?
(Mr Weeks) In a very, very small number of cases,
only five schemes out of 38, in fact.
371. Sure, and the only ones that had a real
public sector comparator; they did something completely different,
you are saying, from all other schemes?
(Mr Weeks) In three of those cases, there were very
special factors that meant PFI was judged not to be viable by
the Regional Office. So actually it was not the public sector
comparator that influenced the choice. In the Guys scheme, for
example, there was a decision taken, for various reasons, that
they should not go ahead with that, and in other schemes it was
felt that the PFI market was swamped out. We do not believe that
the fact that a handful, relatively speaking, of public sector
schemes have been approved, which we welcome, proves that the
public sector comparator is working properly. We would also point
out that the claimed savings under the public sector comparator
for the PFI as a whole have now fallen to 1.75 per cent, according
to ministerial statements. Given the level of indeterminacy in
the assumptions you make in the public sector comparator, we think
a claimed saving of 1.75 per cent does question the whole way
the public sector comparator is being used, and that is one of
the issues we would like our review to look at.
Dr Taylor: In Worcestershire, we believe that
the number of beds was determined by the amount of money that
was available, they decided how much money they had got to pay,
either for the public or the PFI, and then worked out the bed
numbers from that, and it worked out far too low.
Julia Drown: So again it was not the PFI, it
was decided before.
Dr Taylor: It was the amount of money they had
and then they put it to both. And where I would argue which is
why we want an independent, unbiased adviser; you can see people
arguing, the unions one side, other people the other side, that
the public sector comparator could be made almost what you want
it to be made. And this is where we want some really simple person
from the National Audit Office—
Chairman: Don't look at me. Sorry.
Dr Taylor: Someone who can really explain it
to all of us who are not accountants, so we would really get to
the bottom of it.
John Austin: Just a quick one on that. If I
can look at my own area's experience, and the dramatic cut in
beds, obviously, when a new hospital was being built, and a new
scheme, it was easy to argue that all the systems would be in
place which would allow the quicker throughput, and etc., etc.
Dr Taylor: Like the intermediate care beds that
should be there.
John Austin
372. But the point I would make is that, whether
the new hospitals have been built by conventional finance or PFI,
there are not enough beds, but is it going to be more difficult
to increase the number of beds where the hospital is a PFI one
than if it were not?
(Mr Weeks) I would argue, not so much more difficult
but you may get into discussions about additional cost, because
understandably the private sector provider will say, and, I will
be fair to them, it is legitimate for them to say this, "we
agreed to provide what the public authority said they wanted at
the time, and if the public sector authority was not sufficiently
sharp enough to say that they wanted variations for no extra cost
then they have to bear the cost of that." And so I think
that is the problem, that those schemes will have to bear an extra
cost.
John Austin: I think Mr Rose was nodding his
head as well.
Chairman
373. I think there is agreement along the table,
which is the first time we have achieved that today, I think.
(Mr Rose) Definitely, Chairman, as it would be if
it was publicly funded, there would be a cost, and there would
have to be negotiations on what the cost was. I think, Chairman,
if there is one thing that you could do, which I think we would
all agree needs to be looked at, it is to recommend that public
sector comparators become real comparators. There is not one that
I am aware of so far which has really understood what the future
provision of a hospital would cost, because, yes, there is a budget
which the Trust has and it works within it, but also the figures
have to be based, in general, on historic costs, to show how the
hospital has been treated in the past. And since we know there
is a woeful lack of maintenance over the last 20 to 30 years in
the public sector, it is difficult then to put in a full maintenance
figure, or else the Trust publicly is admitting it has not maintained
the estate properly.
Julia Drown
374. So you are saying that the public sector
comparator was made too cheap; so what UNISON are saying then?
(Mr Rose) We are saying it has to be more realistic,
and work is going on within Government to do that. And against
that realism it may well be that better deals come through.
Chairman: If there are no further questions,
can I thank our witnesses for an excellent session. We are very
grateful to all of you for co-operating with our inquiry. You
have, I think, all of you, indicated you may follow up with some
written material; we appreciate that. Thank you very much.
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